Texas Black Swan Event

Guest Post by John Ayers (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

A black swan event has a very low probability of happening but if it does the consequences are devastating. The black swan event for Texas was the weather and the consequence was catastrophic to their power grid. Prior to the February 2021 snowstorm with freezing temperatures, you must go back to December 1929 to find the last historical Texas snowstorm. The storm lasted for 24 hours dropping 12 inches of snow with freezing temperatures. But they did not have natural gas, windmills and solar panels to worry about like today.

The February freeze event left millions of people in the nation’s second-most-populous state without power for days. It paralyzed almost every energy source, from power plants to wind turbines, because their owners hadn’t made the investments needed to produce electricity in subfreezing temperatures. 25 deaths have been confirmed. US oil and natural gas prices increased. The price of gas at the pump rose. I would call these devastating consequences.

US POWER GRIDS

Figure 1 shows a schematic of the 3 power grids in the US. While all 3 of the grids are interconnected, they also are operated independently. Texas is the only state with their own grid. The question is why? The separation of the Texas grid from the others goes back to the evolution of electric utilities early in the last century. After Tom Edison brought the first power plant to Manhattan, small power plants sprouted across Texas bringing electricity to cities which led to their own grid.

The US power grid was built in the 1890’s. It has been updated piecemeal through the years as new technology has become available. Nearly 70% of the transmission and distribution lines are more than 25 years old according to the Department of Energy. The power grid distribution system is regulated by state entities with little or no cyber protection standards, leaving it vulnerable. The US grid comprises more than 7,300 power plants and transformers connected by more than 450,000 miles of high-voltage transmission lines and serves 145 million customers. In most countries, they are state owned but, in the US, the grid is nearly all privately owned.

The breakdown of US grid power sources is:

Natural gas (40.3%)
Nuclear (19.7%)
Coal (19.3%)
Wind (8.4%)
Hydro (7.3%)
Solar (2.3%)
Biomass (1.4%)
Petroleum (0.4%)

This equates to 80 % gas, coal and nuclear, 11 % solar and wind, and the balance from other sources.

The breakdown of Texas grid power sources is:

Natural gas (46%)
Nuclear (11%)
Coal (18%)
Wind (23%)
Solar (2%)

This equates to 75 % gas, coal and nuclear, and 25 % solar and wind.

Figure 1 US Power Grids Overview

(US EPA)

WHAT CAUSED THE POWER GRID TO FAIL?

Texas relies on mostly natural gas for their power. During the winter months they do not rely on wind turbines or solar as much, but do count on nuclear power. The prime reason for the failure was the natural gas frozen pipelines and gas wells dramatically reducing the percent of gas available for power. One nuclear power plant was shut down due to the freezing temperatures reducing available power from this source. Wind turbines froze and snow covered the solar panels. The sun also does not shine in snowstorms. These all contributed to the power grid failure.

RISK ANALYSIS

“In January 2014, power plants owned by Texas’ largest electricity producer buckled under frigid temperatures. Its generators failed more than a dozen times in 12 hours, helping to bring the state’s electric grid to the brink of collapse. The incident was the second in three years for North Texas-based Luminant (a competitive power generation business), whose equipment malfunctions during a more severe storm in 2011 resulted in a $750,000 fine from state energy regulators for failing to deliver promised power to the grid. In the earlier cold snap, the grid was pushed to the limit and rolling blackouts swept the state, spurring an angry legislature to order a study of what went wrong. Experts hired by the Texas Public Utility Commission (PUC), which oversees the state’s electric and water utilities, concluded that power-generating companies like Luminant had failed to understand the “critical failure points” that could cause equipment to stop working in cold weather.

In May 2014, PUC sought changes that would require energy companies to identify and address all potential failure points, including any effects of “weather design limits. Luminant argued against the proposal. In comments to the commission, the company said the requirement was unnecessary and may or may not identify the ‘weak links’ in protections against extreme temperatures. Each weather event [is] dynamic company representatives told regulators. Any engineering analysis that attempted to identify a specific weather design limit would be rendered meaningless.

By the end of the process, the PUC agreed to soften the proposed changes. Instead of identifying all possible failure points in their equipment, power companies would need only to address any that were previously known. The change, which experts say has left Texas power plants more susceptible to the kind of extreme and deadly weather events that bore down on the state last week, is one in a series of cascading failures to shield the state’s electric grid from winter storms, ProPublica and The Texas Tribune found.

Lawmakers and regulators, including the PUC and the industry-friendly Texas Railroad Commission, which regulates the oil and gas industry, have repeatedly ignored, dismissed or watered down efforts to address weaknesses in the state’s sprawling electric grid, which is isolated from the rest of the country.[1]

Texas ignored the extreme cold weather risk apparently because it had such a small probability of occurrence.

RISK MITIGATION

In hindsight, upgrading equipment to withstand extremely low temperatures and adding heaters to the gas lines, gas wells, wind turbines, and nuclear power plants would have gone a long way to mitigate the risk and consequences of it. A high air pressure, water gun or another method could have been developed to rapidly remove snow from solar panels after the storm when the sun usually reappears. These are the obvious steps that could have been taken. Improving the efficiency and performance of the Electric Reliability Council of Texas (ERCOT) would have also mitigated the risk. ERCOT is nonprofit that manages the grid. They performed poorly doing the freeze event.

SUMMARY

If the 2014 analysis that aimed at addressing all potential failure points on the grid was not watered down, then perhaps this catastrophic consequence of the freezing temperatures and snowstorm may not have happened, or at least mitigated the damage. You have no control over the weather, but you have complete control over equipment, pipelines, gas wells and other components of the grid to maintain operation under extreme conditions (cold and hot).

There is never enough money to weatherproof the system before an event, but when disaster strikes billions of dollars suddenly becomes available to fix the damage at taxpayers’ expense. This scenario is far too often the case.

A risk assessment needs to be done for all projects, existing systems, and future systems. Failure to do so leads to disaster most of the time.

Bio:

Currently John is an author, writer and consultant. He authored a book entitled Project Risk Management. It went on sale on Amazon in August 2019. He has presented several Webinars on project risk management to PMI. He writes a weekly column on project risk management for CERN. John also writes monthly blogs for APM. He has conducted a podcast on project risk management. John has published numerous papers about project risk management on LinkedIn.

John earned a BS in Mechanical Engineering and MS in Engineering Management from Northeastern University. He has extensive experience with commercial and DOD companies. He is a member of PMI (Project Management Institute). John has managed numerous large high technical development programs worth in excessive of $100M. He has extensive subcontract management experience domestically and foreign. John has held a number of positions over his career including: Director of Programs; Director of Operations; Program Manager; Project Engineer; Engineering Manager; and Design Engineer. He has experience with: design; manufacturing; test; integration; subcontract management; contracts; project management; risk management; and quality control. John is a certified six sigma specialist, and certified to level 2 EVM (earned value management).https://projectriskmanagement.info/

If you want to learn more about project and project risk management, then consider purchasing my book. Most of the books you will find describe what it is, the pros and cons, and other type of general information but they do not tell you how to implement the basics of project and project risk management on your project. My book does. It is practical, presents project management, earned value management, risk management, and subcontractor management. These “cornerstones” of project risk management address virtually any risk that your project may be subjected to.